Jump in private consumption helps Germany avoid recession in third quarter

Tue Nov 25, 2014 6:38am EST
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By Noah Barkin

BERLIN (Reuters) - A sharp rise in private consumption more than compensated for stubborn weakness in investment to help the German economy post modest growth in the third quarter and avoid a technical recession, data showed on Tuesday.

The Federal Statistics Office confirmed an earlier flash estimate showing a 0.1 percent rise in seasonally-adjusted gross domestic product (GDP).

Private consumption rose 0.7 percent quarter-on-quarter, the biggest increase in three years, and public investment rose 0.6 percent. Overall consumption contributed 0.5 percentage points to growth, while trade provided modest support.

On the downside, investment in equipment tumbled by 2.3 percent, while gross capital and construction investment also fell. Overall, investment subtracted 0.7 percentage points from GDP growth in the quarter.

But in a positive sign for the fourth quarter, inventories were a major drag on growth, suggesting a rebound in the final months of the year.

"We are not in a recession," Finance Minister Wolfgang Schaeuble told parliament after the data was released.

"We don't have quite such good economic growth as we did before but we are performing close to our economic capacity. We can't allow thoughtless chitchat about a 'crisis' to encourage one."

He defended Chancellor Angela Merkel's "grand coalition" government against accusations that it is not investing heavily enough in infrastructure, spending that critics say is vital to help spur growth in Europe.   Continued...

A worker pulls a pallet truck through one of the warehouses at toy company Simba Dickie's logistics centre in Sonneberg, eastern Germany, October 9, 2014.  REUTERS/Michelle Martin